There’s a swing factor in property you just don’t find anywhere else.
You know why property is the most amazing asset class in the world?
Because its different?
Why is it different?
Well, did you ever hear about the guy who overpaid on BHP shares because he just loved the stock so much and his emotions got the better of him?
That’s because it never happens.
But in property, it happens all the time.
Like this sale the other day. Emotions ended up driving the auction $365,000 over reserve.
It was a three-bedroom house on two titles covering 993 square metres at 40 Pulsford Road, Prospect, SA. It sold at auction for $1,901,000.
According to the agent:
It sold because of its uniqueness and the high demand in the area. It was a character bluestone cottage built in 1880, but not heritage-listed. Other properties on the street from a similar era had already been knocked down. The most unusual thing was the fact it was 2 separate Torrens title allotments being sold together.
We had a lot of interest from people living on the street or in the area with one block who wanted more. The eventual buyer lives on the same street. He has a 500-square-metre block and wants to build a three-car garage.
For him, having a three-car garage was really important. That’s something he couldn’t have in current property. He’ll do some renovation, but for him it was the fact he got a 30-metre frontage.
30 metre frontage? Two titles? That sounds like something a lot of developers would be interested in… Were there no developers sniffing around?
It’s a really good development opportunity. You could put three homes on that site.
We developers did bid, but they bid lower, in the $1.1 million-$1.2 million range and missed out.
But hang on, don’t developers usually offer more than owner occupiers? Isnt that the rule?
It comes back to fact that he lived in the area. There’s an emotional connection.
And that’s it.
I’m no area expert on inner-North Adelaide, but my gut sense would be that anything north of $1.2m would struggle to be in the money.
The developers knew what they were doing.
But the guy who bought it?
He just didn’t care about the numbers. He had a connection that he valued and he was willing to pay for it.
And for me, this is what makes property so interesting. Emotions are a factor.
Strike the right emotional tone and you can make serious money.
It’s a double-edged sword though. Strike the wrong tone and you’ll be underpaid.
But it’s very rare.
Developers set a floor price based on pure numbers.
Above that, it’s all about emotion.
And the sky’s the limit.